Leucadia’s failed effort to build the plant at 114th Street and Burley Avenue highlights the difficult environment state leaders face as they struggle to create jobs in the face of a divided energy policy. (Zbigniew Bzdak, Chicago Tribune)

Leucadia National Corp. said Tuesday it has no plans to try to override Gov. Pat Quinn's veto of a bill that would allow the company to build a $3 billion coal gasification plant in Chicago.

"While we find the governor's decision unfortunate, we will not seek to override the veto, and we look forward to continuing our work at our other facilities throughout the country," the company said. Quinn vetoed the bill Friday.

Leucadia's 31/2-year failed effort to build the plant highlights the difficult environment state leaders face as they struggle to create jobs in the face of a divided energy policy.

State leaders disagree about whether natural gas prices will go up or down, which technologies should be considered "clean," how energy projects should be funded and which energy projects are a priority; and they have differing views when weighing jobs against additional costs a clean energy project might heap on consumers.

"I don't think Illinois is unique in its energy policy conundrum," said Tom Wolf, executive director of the Illinois Chamber of Commerce Energy Council. "It's just a wild time for energy."

Leucadia's project came as the nation's energy future is in flux. Coal plants are closing and the coal industry is struggling to remain in the mix amid stricter environmental regulations and low-priced natural gas.

Banks won't finance projects like Leucadia's without guaranteed customers. That's because Illinois is competing against states that don't have a competitive energy market. In those states, utility customers pay for new plants to be built in their bills and cost recovery is guaranteed, which is what Leucadia sought from state legislators.

As a result, the coal-to-gas plant became the centerpiece of a power struggle pitting the state legislature against the state's natural gas utilities, with the Illinois Commerce Commission pulled in because of its regulatory function, as well as various environmental groups who oppose all uses of coal. Quinn twice vetoed legislation citing consumer protection concerns.

The Illinois Black Caucus and House Speaker Michael Madigan supported the plant, saying it would bring desperately needed jobs to the South Side of Chicago and downstate Illinois, where the coal would be mined.

Illinois' coal industry said the plant would give it new life. Illinois ships most of its coal out of the country because it is too dirty to burn. The plant proposed to gasify it, significantly reducing pollutants and making it usable in state.

Consumer advocate Citizens Utility Board said the deal was unfair because the bill that Quinn vetoed would have required downstate ratepayers to essentially fund the construction and operation of the plant.

When the only two utilities that signed on to the deal, Nicor Gas and Ameren Illinois, protested the financial burden they were expected to shoulder to the ICC, the regulatory agency sided with the utilities against the legislature.

Then the legislature passed a law mandating that the ICC make the utilities pay for the plant's gas or face biannual rate reviews. So although the Leucadia plant is dead, both Peoples Gas and North Shore Gas, which refused to sign on to the deal, must subject themselves to the onerous and lengthy rate reviews.

"We knew the decision we were making when we made it," said Jennifer Block, a spokeswoman for Peoples and North Shore, which are owned by Integrys Energy Group. "We stand by our customers."

The state's disjointed energy policy is exacerbated by a culture of backdoor politics in Springfield.

"Illinois is the epicenter for dysfunctional politics, and clean energy is a perfect example of that," said a clean energy lobbyist in Springfield.

The state's energy policy is broken, according to business and energy policy leaders who responded to a survey by Clean Energy Trust, an energy policy think tank in Chicago. A renewable portfolio standard that sets the state's clean energy goals going forward needs to be restructured, respondents said. Utilities are given no incentive to increase energy efficiency programs. Long-term planning is virtually nonexistent, they said, and policies seem to change year to year.

"It's not just having resources," said one respondent. "It's having stability and more certainty about those resources. Even if you get the same number of dollars you had the year before, the uncertainty associated with that makes those same number of dollars less effective because you have to manage your program with a much shorter-term focus."

Wolf at the chamber said he believes there is enough common ground among various constituents that working energy policy will eventually surface. Businesses should be forced to compete for customers in Illinois, not chosen one winner at a time. There should be diversity and the state should be cost competitive, he said.

"Those ingredients? How you bake them into a cake that makes sense?" he said. "Well, that's difficult to do."